Ch13 Homework instructions I help Question 8 (of 10) save & Exit 11 Submit 0.50
ID: 2592744 • Letter: C
Question
Ch13 Homework instructions I help Question 8 (of 10) save & Exit 11 Submit 0.50 points The average price of a gallon of gas in 2013 dropped S0.12 (3 percent) from $3.61 in 2012 (to S3.49 in 2013). Let's see whether these changes are reflected in the income statement of Chevron Corporation for the year ended December 31, 2013 (amounts in billions) Total Revenues Costs of Crude Oil and Products Other Operating Costs 2013 2012 S220 $231 149 36 143 Income before Income Tax Expense Income Tax Expense 36 15 46 20 Net Income S 21 S 26 Required: 1-a. Compute the gross profit percentage for each year. (Round your answers to 1 decimal place.) Gross Profit 2012 2013 1-b. Assuming that the change from 2012 to 2013 is the beginning of a sustained trend, is Chevron likely to earn more or less gross profit from each dollar of sales in 2014? More Gross Profit O Less Gross Profit 2-a. Compute the net profit margin for each year. (Round your answers to 1 decimal place.) in 2013Explanation / Answer
Answer 1-a.
2012:
Gross Profit Percentage = (Total Revenue - Cost of Crude Oil and Products) / Total Revenue
Gross Profit Percentage = ($231 - $149) / $231
Gross Profit Percentage = 35.5%
2013:
Gross Profit Percentage = (Total Revenue - Cost of Crude Oil and Products) / Total Revenue
Gross Profit Percentage = ($220 - $143) / $220
Gross Profit Percentage = 35.0%
Answer 1-b.
Gross Profit Percentage decreased from 2012 to 2013, so, Chevron is likely to earn less gross profit from each dollar of sales in 2014.
Answer 2-a.
2012:
Net Profit Margin = Net Income / Total Revenue
Net Profit Margin = $26 / $231
Net Profit Margin = 11.3%
2013:
Net Profit Margin = Net Income / Total Revenue
Net Profit Margin = $21 / $220
Net Profit Margin = 9.5%
Answer 2-b.
Chevron did worse job in controlling expenses as net profit margin decreases in 2013 as compared to 2012.
Answer 3-a.
2012:
Fixed Asset Turnover = Total Revenue / Average Net Fixed Assets
Fixed Asset Turnover = $231 / $130
Fixed Asset Turnover = 1.78 times
2013:
Fixed Asset Turnover = Total Revenue / Average Net Fixed Assets
Fixed Asset Turnover = $220 / $150
Fixed Asset Turnover = 1.47 times
Answer 3-b.
Company did better utilization of investment in fixed assets to generate revenues in 2012.
Answer 4-a.
2012:
Return on Equity (ROE) = Net Income / Average Stockholders’ Equity
Return on Equity (ROE) = $26 / $130
Return on Equity (ROE) = 20.00%
2013:
Return on Equity (ROE) = Net Income / Average Stockholders’ Equity
Return on Equity (ROE) = $21 / $130
Return on Equity (ROE) = 16.15%
Answer 4-b.
Company generate greater returns for stockholders in 2012.